US Fed Keeps Rates Unchanged For 3rd Time As Powell Resists Trump's Pressure For A Cut
US Fed Policy Meeting Outcome: The FOMC decides to maintain the target range for the federal funds rate at 4.25-4.5 per cent.
US Fed Policy Meeting May 2025: The US Federal Reserve on Wednesday kept its key interest rates unchanged at 4.25%-4.50% for the third time in a row, in line with the market expectations. The monetary policy review comes amid the tariff war and US President Donald Trump’s pressure to cut rates.
“In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 per cent," the US Fed said in a statement on Wednesday, May 7, 2025.
Recommended Stories
It said the economy overall has “continued to expand at a solid pace", attributing a drop in first-quarter output to record imports as businesses and households rushed to front-run new import taxes.
The US economy shrank 0.3 per cent during the January-March 2025 quarter. The January-March expansion was the slowest in almost three years and was down from 2.4% in the last three months of 2024.
“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilised at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated," the US Fed stated.
However, the US Fed flagged a risk of higher prices and higher unemployment.
“Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen," the FOMC stated.
Ahead of the policy decision, the Dow Jones was trading higher by 0.69 per cent and the S&P 500 Index was up by 0.42 per cent. The US Dollar Index was also trading higher by 0.34 per cent at 99.58. However, the 10-year US bond yield was lower at 4.285 per cent.
After the latest policy announcement, the US markets continued to trade higher.
Inflation in the US cooled in March, and the Fed’s preferred inflation gauge stands at 3.6 per cent — down from the post-pandemic peak but still well above the Fed’s 2 per cent target.
According to analysts, the September 2025 meeting remains the more likely timeline for a cut but Fed officials have signalled flexibility depending on how inflation, labour markets, and trade dynamics evolve.
In the previous monetary policy review in March, the US Federal Reserve had kept its key interest rates unchanged at 4.25-4.50 per cent for the second time in a row. Along with the rate decision, officials also updated their rate cut projections. They saw 50 basis points rate cut in 2025.
- Location :
- First Published: